An estimated $50 million of Xerox Corporation's bank debt changed hands last week at 85-86, continuing an upward march. The two desks said to be the most active in the name are J.P. Morgan and Deutsche Bank, but officials at both shops declined to confirm rumored trades. The paper traded at 82 to 831/ 2 two weeks ago, and the consistent upticks in the debt's levels--and heavy trading as it moves up--mark a notable turnaround for a company that was getting hammered less than a year ago. Dealers said the levels are partly a reflection of a company that has done everything from asset sales to new product offerings to improve business. Calls to Barry Romeril, cfo, were not returned.
In its darkest days, the company's bank debt was trading in the low 50s last December. Now, dealers say they see the credit headed back to levels near par. "People are going to get all their money back," predicted one, noting that a big plus from the company is its move to third-party financing agreements. Christa Carone, spokeswoman for the company, explained that Xerox had provided equipment financing for customers looking to purchase its products. Last spring, the company started to transition equipment financing to third parties. "When our credit rating was downgraded, it became more expensive for Xerox to borrow money," she explained. "We're reengineering our company so it focuses more on our core business; we're not a financing company." By the end of the year the company expects that 75% of its new equipment purchasing will be financed through third parties.
Last December the company announced it had exhausted most of its $7 billion loan, which sparked heavy unloading of the paper and weighed down levels. The $7 billion facility matures in 2002 and is priced at 15 basis points over LIBOR. First Chicago NBD, J.P. Morgan and Citibank are the lead arrangers.